Sunday, October 29, 2006

Hammer Entry - More Examples

Here are four hammer plays – note how they all appear alike in the entry but we have four different exit clues.

ACI – first the energy sector was going up on this date so ACI was a natural for a play – the coal industry normally participates in the energy rallies. This is a standard white-hammer indicator (1). The next bar in the sequence opened at the close of the white hammer and then descended. It then rallied (2) and the buy point is when the price exceeds the high of the hammer (3). The sell point is at 4 where we see two lower highs.

RIO – a steel play the hammer is only hammer-like but close enough to serve as an entry indicator. The next bar in the sequence opened at the high of the hammer and then descended. It then rallied (2) and the buy point is when the price exceeds the close of the white hammer (3). The sell point is at 4 where we see a twin-peaks top (two highs exactly the same). The twin peaks is generally a good exit point.

ATHR – a telecom play has three hammers in a row and any one of them could have been used for an entry indicator because we will only enter when we get the confirmation where the price exceeds the close of the red hammer. Therefore using the 4th bar as the entry point we wait until a price exceeds that close (3). The exit is based on the “steeples” we see developing at 4 and confirmed at 5. Sometimes when the price gets away from the 8 period EMA it begins to walk sideways back to it. That’s what we might be seeing in bars 10 and 11. But the confirmation comes at 5 and that says – exit now.

PETM - an Internet play – this is a good one in that it does this often. This is a red hammer entry (1) at bar 6. The next bar in the sequence opened at the close of the red hammer and then descended. It then rallied (2) and the buy point is when the price exceeds the close of the red hammer (3). The exit (4) is the large steeple at bar 12. I generally use this upside down hammer (or hanging man) as my clue to exit. Note that the 11th bar on ATHR is also a hanging man.

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I am a stock trader. I have chosen this profession because it suits my need to do analytical work for profit. Thus I am an analyst who trades for a living. It is fun even when taking a loss. I am forever seeking the next best idea. I intend to use this blog to share my ideas with you.